United States v. Lyft, Inc.: Regulating the Workplace of Rideshares

The case of United States v. Lyft, Inc. was settled on Friday, October 25th, 2024. The multi-million dollar ride-share company agreed to pay a $2.1 million fine to resolve charges with the United States Department of Justice, among other requirements of the proposed settlement [1]. Judge Peter Kang signed an order approving the settlement the day before it was publicized [2].

The case was originally brought up by the Federal Trade Commission to address deceptive claims that Lyft had advertised to attract more drivers. The FTC claims that it was acting in its function to use resources and tools to hold businesses accountable for violations of law and exploiting American workers. 

Throughout 2021 and 2022, Lyft released information regarding hourly wages for their drivers. The reports were based on the earnings of the company’s top 20% of drivers. Therefore, the hourly rates were not reflective of the majority of employees’ earnings. In addition, Lyft promoted “earning guarantees” that drivers interpreted as bonuses that they did not receive [3]. The guarantees advertised that drivers would be paid a certain amount if they completed a specific number of rides in a given time period. In practice, drivers would receive the difference between what they earned and the proposed bonus instead of the full amount [4]. The complaint of the case noted that proposed wages were inflated by 30% in the Lyft advertisements. The advertisements were intended to fill a supply shortage of drivers following the pandemic and the subsequent surge of demand related to food delivery and transportation. 

The case is not surprising, considering that charges were filed against Lyft for continuing deceptive advertisements even after receiving the FTC’s Notice of Penalty Offenses, which put the company on notice for types of claims that are unlawful [5]. The notice was intended to serve as a warning for Lyft, with it later getting ignored.  

Besides the 2.1 million dollar fine, Lyft’s settlement terms prohibited the company from making any additional earning claims or advertisements without any meaningful evidence to support their assertions. The settlement specifies that any guarantees must not include tips as part of the stated hourly amount due to the deceptive nature of potential earnings. Lyft must also clearly disclose any nuances with bonuses, such as the fact that any additional compensation will be the difference between regular earnings and the guaranteed amount [6]. All of Lyft’s new measures must be notified to the company’s drivers to prevent any confusion regarding earnings and resolve the controversy regarding past false advertisements. 

Following the FTC and DOJ investigation of false claims, Lyft announced company-wide policy changes to address misinformation and promote transparency for its drivers and riders. In October 2022, an up-front pay system was created to disclose ride earnings before accepting. This February, Lyft added an Earnings Commitment to their terms and conditions. This measure ensures that drivers will earn at least 70% of rider payments each week. If weekly earnings do not reflect this, the company will compensate drivers for the remaining amount. This month, Lyft added a feature that displays a more accurate estimate of hourly earnings if a pending ride is accepted [7]. While Lyft implemented additional changes to promote driving transparency, their statement lacks an admission of guilt regarding the false earnings claims. In Lyft’s statement of the settlement, Lyft avoided accepting responsibility for advertisements by using language that delegitimizes “alleged” claims by FTC and DOJ [8].

The Lyft case serves as a critical moment for ride-share companies and emerging forms of income regarding employee conditions. Many people rely on apps like Lyft and Uber as their main source of income, given the limited barrier of entry and customizable schedules. The company technically operates remotely, considering individuals use personal property to transport customers, and any communication comes through the application. Given the unique nature of employment, drivers are more vulnerable to abuses of corporate power. The false promise of profits is a workplace issue in the sense that even without a formal definition of the work environment, drivers may anticipate more profits than they receive, which can impact their livelihood. Since the employment contract is more fluid and does not enforce yearly salaries and benefits, ride-share companies have a duty to their employees to be transparent regarding their terms and conditions as independent contractors. Legal action against Lyft serves as a means of regulating this industry and setting a standard for workers' rights for drivers. With the context of the COVID-19 pandemic, Lyf,t among other ride-share companies, experienced major economic growth and expansion. Policies that affect employees need to maintain a balance between the company's motivations and worker rights. 

As FTC Chair, Lima Khan, states, “It is illegal to lure workers with misleading claims about how much they will earn on the job” [9]. While the FTC and DOJ pursued a formal investigation into Lyft’s false claims, the company did not admit guilt. The settlement allows Lyft to implement some changes and escape accountability for the situation. The case outcome also serves as a precedent for other ride-share companies, indicating that employee abuses may be excused with some small adjustments. Additional legal action is needed to prevent large corporations from escaping punishment for their wrong-doings and exploiting employees. A formal admission of guilt is the only way for large corporations to promote transparency when disclosing misconduct.

Sources:

1. Lyft to Pay $2.1 Million Fine to Settle US Charges it Inflated Drivers' Earnings Prospects, Reuters (October 25, 2024), https://www.reuters.com/legal/us-sues-lyft-saying-company-inflated-drivers-earnings-prospects-2024-10-25/
2. Lyft Pays $2.1 Million to Settle Case Alleging the Ride-Hailing Service Deceived Drivers, Associated Press (November 1, 2024), https://apnews.com/article/lyft-settlement-drivers-deceptive-pay-8b08fd076c1af160d057be435acf9adf 
3. Id. 
4. FTC Takes Action to Stop Lyft from Deceiving Drivers with Misleading Earnings Claims, Federal Trade Commission (October 25, 2024), https://www.ftc.gov/news-events/news/press-releases/2024/10/ftc-takes-action-stop-lyft-deceiving-drivers-misleading-earnings-claims 
5. Id. 
6. Id. 
7. Driving Transparency: Clear Communication on Earnings for Drivers, Lyft (October 25, 2024), https://www.lyft.com/blog/posts/driving-transparency-clear-communication-on-earnings-for-drivers 
8. Id. 
9.  Id.